M. Gouri Shankar Murthy, Member (J)
1. This is an Application by the Revenue purporting to be one for a reference to the High Court of Allahabad of certain questions said to be questions of law arising out of an order of the Tribunal in terms of Section 35G of the Central Excises & Salt Act, 1944. We say “purporting” because, as will appear below, the applicant had failed to furnish a true and correct statement of facts in Annexure ‘A’ to his application dated 26th August, 1983. Nor did he furnish the draft of the questions of law sought to be referred initially in Annexure ‘B’ to the said Application. Subsequently, after the Application became part heard, he filed a revised Annexure ‘B’ dated 23-3-1984 in which he attempted to set out, what according to him, is a question of law that has to be referred to the Hon’ble High Court of Allahabad.
2. The Tribunal’s order which had, according to the Applicant, given rise to a question of law, is the one contained in Order No. 221/83 dated 14th June, 1983 in Appeal No. ED(Del.)(T.) 130/82-NRB, between Shriram Pistons & Rings Ltd. v. Collector of Central Excise, Meerut -1983 (14) E.L.T. 1927.
3. The questions that arose for consideration in the aforesaid Appeal were:
(a) Whether, in the facts and circumstances of the case, the proviso to Rule 10 of the Central Excise Rules, as it read at the relevant time, was applicable to the issue of the show cause notice for recovery of duty? If not, was the show cause notice dated 5-9-1980 barred by limitation?
(b) Was the levy of penalty under Rule 173Q sustainable?
(c) Did the show cause notice dated 5-9-1980 abate in consequence of the repeal of Rule 10 and its re-enactment as Section 11 of the Act with effect from 17-11-1980 without providing for any saving of pending proceedings?
(d) Whether, in the facts and circumstances of the case, there has been a “manufacture” of the pistons in question and if so, the process carried out by the appellant came within the scope of Rule 173H of the Rules?
While we decided the questions (a) and (b) supra in favour of the Respondent herein (i.e. M/s. Shriram Pistons & Rings Ltd.), the questions at (c) and (d) supra were decided in favour of the Revenue (i.e. the Applicant herein).
4. The facts relevant for the disposal of the aforesaid Appeal as well as the instant application are all set forth in our order in the Appeal and do not require to be recapitulated in the interests of brevity. Suffice it to say, however, that we held, inter alia, –
(A) on a construction of the relevant Rules, that, in terms of the proviso to Rule 10, as it then existed, it is only if a short levy was occasioned by reason of –
(i) fraud, collusion or any wilful misstatement or suppression of facts by such person or his agent; or
(ii) contravention of any of the rules with intent to avoid payment of duty; (emphasis supplied) the period within which the notice to show cause could be issued is five years instead of six months;
(B) on the facts, that, it cannot but be held that the proviso to Rule 10 was altogether inapplicable for the recovery of the duty in this case, for,-
(a) when the entire process was discussed and ultimately the Revenue were told that they would start “remelting all our returned goods” in accordance with the clearance given by the excise authorities, there has been no suggestion of the truth of any fact in which the appellant did not believe in, i.e. no misstatement; no suppresio veri suggesto falsi; and no promise made without intent to perform. Shri Raghavantyer was hard put to disclose any single aspect of the entire process as fraudulent. It was a plea of despair that the failure of the appellant to claim strict adherence to the requirement of the rules was per se, an act of fraud;
(b) “fraud” has not only to be alleged but particular thereof have necessarily to be furnished; there has not even an allegation of fraud in the show cause notice; or of misstatement or suppression of facts; but yet the Collector proceeds to observe that it was alleged in the show cause notice that the appellant had illegally availed of the facility under Rule 173H by “misrepresenting facts and suppressing vital details” and further proceeds to hold that there was wilful misstatement, and suppression of facts; the observation as well as the findings are as unwarranted since they fall outside the ambit of the show cause notice, as they are untenable in the absence of particulars;
(c) even if we are to take it that “wilful mis-statement” or “suppression of facts” do not come within “fraud” occurring in Rule 10 and they are apart from what strictly came within its scope, still, no misstatement or suppression of facts at any stage had been either alleged or proved;
(d) in the premises, the case does not fall within Clause (i) to the proviso to Rule 10 so as to attract the five year period of limitation to govern the adjudication in question;
(e) the second clause of the proviso to Rule 10 is equally inapplicable seeing that-
(i) it speaks of contravention of the provisions of the Rules with “intent to evade payment of duty”;
(ii) no such intent had been either alleged in the show cause notice nor proved in the proceedings;
(iii) in actual fact the discussions that proceeded the commencement of the actual resort to 173-H negate the intent to evade payment of duty; one would hardly expect correspondence and discussions of the entire procedure to be followed if the intent were actually to evade payment of duty;
(iv) even if, therefore, there was contravention of any of the Rules, it was not with intent to evade payment of duty;
(v) on similar facts, the A.P. High Court in 1979 (2) E.L.T. 402 held that there was no intent to evade payment of duty.
(C) that once the proviso to Rule 10 was inapplicable to the facts of the case, a demand on 5-9-1980 for payment of duty in terms of Rule 9(2) for the period between 12-11-76 and 14-6-1979 was obviously barred under Rule 10(1), being beyond six months from “the relevant date/s”, assuming that the returned pistons were cleared, indeed, after re-manufacture and not merely repair, remaking etc. in terms of Rule 173H.
5. According to the revised Annexure ‘B’ filed by the Applicant, the question of law for reference to the Hon’ble High Court is “whether the period of limitation for recovery of duties in cases where the contravention of the provisions of Rule 173H of the Central Excise Rules, 1944 is clearly established in the above manner should be five years or six months from the relevant date”. (Revised Annexure ‘B’)
6. It will be observed that,-
(a) Rule 173H merely provides for retention or re-entry of duty paid goods in the factory or warehouse and in so far as is relevant in the instant case, when required for remaking, refining, re-conditioning, repairing, or subjecting to any similar process in the factory;
(b) if the said rule was not applicable to the facts of the instant case and there was consequential failure to pay duty that was otherwise leviable, resort has, necessarily, to be made to Rules 9,10 and 173Q. Rule 173H itself does not speak of an abuse of its provisions which may entail payment of duty or prescribe the period of limitation within which such duty could be recovered;
(c) a perusal of the aforesaid Rules 9, 10 and 173Q reveal that in terms of the proviso to Rule 10 the period within which a notice to show cause in terms thereof could be issued within 5 years instead of six months of the relevant date only if either,-
(i) fraud, collusion or any wilful mis-statement or suppression of facts by such person or his agent; or
(ii) contravention of any of the rule with intent to avoid payment of duty, is not only alleged but proved as well.
(d) if, beginning with show cause notice, the entire case for the applicant rested on a mere contravention of rules and not either fraud, collusion or any wilful misstatement or suppression of facts, it needs hardly be said that there is no question of fraud or collusion, etc. The applicant cannot be permitted to make a new case not made in the show cause notice;
(e) if it were entirely contravention of rules that was alleged in the show cause notice, it was obligatory for the applicant to have proved that such contravention was with intent to avoid payment of duty. As was held by us, the applicant had singularly failed to establish the requisite intent in the facts and circumstances of the case. On the contrary, it was established that the resort to Rule 173H by the Respondent in respect of the pistons rejected for replacement was not merely to the knowledge of the proper officer of the Respondent but at his insistence and with his entire approval. The idea was mooted, the modalities discussed threadbare and the Respondent’s letter dated 10-1-1977 was the last word on the subject.
7. The question sought to be referred, on the contrary, impliedly assumes that mere contravention of the Rules even without the requisite intent, if established, will attract the larger period of limitation and presupposes that such contravention had been established. Contravention of Rule 173H was never in issue. Applicability of Rule 173H was the issue and we decided that it was inapplicable in the facts and circumstances of the case. Even if there was any contravention of any of the Rules, it was our finding that it was not with intent to avoid payment of duty. The question either betrays ignorance of or otherwise confuses the real issue that arose for determination and were actually decided in the Appeal. Nor did the applicant challenge our findings in any way. The aforesaid question cannot be said to arise out of our order in the circumstances.
8. Indeed, the entire application is nothing but an attempt to confuse the issues and to that end, the facts of the case had even been distorted-
(a) In para (1) of the Annexure ‘A’ to the Application (Statement of facts) it was stated that – “it was detected by the Central Excise Officers on 21-8-1979 that they have illegally removed the dutiable goods as mentioned in the show cause notice before the Collector of Central Excise, Meerut without payment of duty, in contravention of the provisions of the Central Excise Rules, 1944 by mis-representing and suppressing the facts as regards re-manufacture of rejected and returned used pistons and also by suppressing other relevant facts with regard to the relaxation under Rule 173H of the Central Excise Rules, 1944 for the period 12-11-1976 to 14-6-1979 clearing pistons and rings without payment of duty which were otherwise liable to payment of duty at appropriate rates”.
Now, we had categorically held (and a cursory perusal of the show cause notice will support our finding) that there had been no allegation even that the Respondent was guilty of fraud, mis-statement or suppression of facts. Right through, it was only contravention of various Rules that was alleged. And yet in the statement of facts, it is made to appear as if the show cause notice had, indeed, alleged misrepresentation and suppression of facts;
(b) In para (2) of the same Annexure, the contents of the letter of the Assistant Collector dated 2-8-1976 and the Respondent’s letter dated 10-1-1977 were distorted. The Assistant Collector did not direct the Respondent in his letter dated 10-1-1977 that they were to adhere to the conditions laid down by the Collector in his Notification No. 5/70. All that he wrote was that the Respondent may approach the Superintendent concern” to aprise you about procedure under Rule 173H and the accounts to be maintained as prescribed by the Collector, Central Excise, Kanpur under Notification No. 5/70″.
(c) In para (3) of the said Annexure, reference was made to the Respondent’s letter dated 10-1-1977. In the said letter, a reference was categorically made to the visit of the Assistant Collector on 31-12-1976 when the matter was discussed and it was further placed on record that “we were informed that we can start remelting all our returned goods and remake them into fresh pistons and rings of the same category and redespatch them without payment of duty. In view of the above clarification, we propose to remelt all the goods that are returned to our works for making reprocessing and make fresh pistons and rings out of them and redespatch them to our customers without payment of duty”. There could be no mistake about their intent to remelt and remake fresh pistons and rings out of the rejected lots and clear them without payment of duty and the approval given by the Assistant Collector to such a course. Yet, in Annexure ‘A’, it was made to appear as if the letter spoke only of “receipt and reprocessing of all their returned material” apart from containing a vague reference to the discussions held as regards the “remelting and remaking of fresh pistons and rings of the same category”.
9. There are other such misstatements of facts in the original and revised Annexure ‘B’ as well.
10. In the premises we have no hesitation in dismissing the application.
11. The Respondent had filed cross-objections under Section 35G(2) of the Act proposing certain questions stated to be of law on the issues decided against him apart from a reply to the aforesaid Reference Application.
However, it was conceded in the course of the hearing that the questions for reference proposed in the cross-objections need not be referred, if the Reference Application itself were to be dismissed. Since we are not proposing to make any reference whatsoever and the Reference Application itself is dismissed, we dismiss the cross-objections as well.